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Saudis stand by commitment to oil production cuts

Saudi Arabia, the world’s biggest oil exporter, moved to allay fears that the kingdom was backing away from its pledge to curb production, underlining its concern about a 10 per cent plunge in the crude price over the past week.

The kingdom’s energy ministry rushed out a rare statement on Tuesday asserting its commitment to “stabilising the global oil market”, just as global benchmark Brent crude slipped towards $50 a barrel for the first time this year.

The statement, released after 8pm in Riyadh, came after Opec’s monthly report showed Saudi Arabia’s production had increased in February, adding to pressure on the market that was already concerned about a rebound in US shale oil output.

“Saudi Arabia assures the market that it is committed and determined to stabilising the global oil market by working closely with all other participating Opec and non-Opec producers,” the ministry said.

Brent crude, the global benchmark, has dropped by almost 10 per cent to a low of $50.25 a barrel in the last week, while US marker West Texas Intermediate has fallen almost 11 per cent to $47.07 a barrel.

Both benchmarks have erased all their gains since some of the world’s biggest producers agreed to curb supplies as part of a deal late last year as a rebound in prices has stoked a resurgence in US shale oil production.

Khalid al-Falih, the kingdom’s energy minister, said last week the supply cut deal between Opec and big producers such as Russia were helping sow the “green shoots” of recovery in the US.

The latest statement from Saudi Arabia was a rare departure from the normal communication strategy of the energy ministry, which often passes messages to the market through individual advisers and trusted media contacts.

While the kingdom largely addressed technical matters related to its production figures versus its sales for the export market, it signalled Saudi Arabia’s growing concern about recent price moves.

Saudi Arabia is preparing a listing of its state energy giant Saudi Aramco, in what would be the world’s largest flotation, as the kingdom seeks to raise cash and diversify its oil-dependent economy, which has been battered by a two-year price crash.

Deputy crown prince Mohammed bin Salman al-Saud, who is driving the economic overhaul of the kingdom, met US President Donald Trump at the White House on Tuesday. The New York Stock Exchange is among the venues the kingdom is considering for the international listing of Saudi Aramco, planned for late next year.

The Opec report published on Tuesday had raised concerns the kingdom was departing from its promise to curb output as part of the global deal. Saudi Arabia has led steep cuts from the group, with production dropping from 10.5m b/d in December.

Mr Falih last week warned other participants in the deal that the steep production cuts must be shared by all. “Saudi Arabia will not allow itself to be used by others,” he said.

So-called secondary source data, using assessments from consultants and analysts, showed the kingdom decreased its production in February from the previous month to under 9.8m b/d. But the Saudi government’s own data submitted to Opec shows an increase in production to above 10m b/d.

The ministry attributed the increase to technical reasons including oil moving into storage.

Opec raised its estimates for oil production this year from outside of the cartel as US shale drillers lift activity in response to higher prices, underlining the threat to the group’s attempts to balance the market.

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